Baseball's Finances? Just Fine, Despite the Strike

Testifying before the U.S. Senate in February 1995, Acting Commissioner for Life Bud Selig warned, "I think there are a significant number of clubs that probably could not make it through the season" without major concessions from the players. The players made no concessions and the strike cost the owners millions, but we're still waiting for that first bankruptcy. Since MLB teams don't open their books to outside observers, how can an outsider assess baseball's true financial condition?

One way is to look at the cost of franchises. No franchise has been sold at a loss since George Steinbrenner bought the Yankees from CBS more than two decades ago. In 1991, Denver and Miami interests paid $95 million for expansion franchises. Four years later, in the middle of the strike, MLB charged $130 million for the next two expansion teams, Phoenix and Tampa. Sure doesn't look like a dying industry to me...

The folks at Financial World have another method, based on estimates of team revenues and expenses. Their conclusion? Despite the strike, the average Major League Baseball team turned a $2.1 million profit last year. The Red Sox did far better. Here's how the numbers break down:

Gate receipts. Last year Sox fans paid $27.1 million to enter Fenway -- sixth highest total in the majors, behind Colorado, Baltimore, Toronto, Cleveland and Atlanta. Colorado and Baltimore both took in more than $35 million; at the other end of the spectrum, the Pirates and Padres received less than $10 million.

Media revenues. With $24.2 million from TV and radio, the Red Sox were the majors' fourth highest grossers, slightly behind the Dodgers. The two New York teams far outstripped the field: the pitiful Mets earned $33.6 million, while the Yankees' $42 million/year cable contract contributed to a $54.3 million gross. (The Braves and Cubs, whose owners also operate superstations, receive artificially low rights fees.) Meanwhile, the Brewers took in less than $10 million, with the Royals, Padres and Mariners only slightly better off.

Stadium revenues (luxury boxes, parking, concessions). The Sox' $14.7 million ranked sixth, behind the Rangers, Orioles, Dodgers, Rockies and White Sox: four teams with new stadia and a fifth which owns its park outright. The Pirates, Twins and Expos received less than $3.5 million each from these sources.

Overall revenues. In 1995 the Sox' $67.9 million from baseball operations ranked fifth in the majors -- but only third in the AL East -- behind the Yankees, Orioles, Dodgers, and Rockies. By contrast, the Pirates received less than $25 million; the Brewers, Expos and Padres, under $30 million.

Player expenses. The Red Sox' $32.1 million ranked 15th out of 28 teams. The Yankees, Orioles and Blue Jays spent at least $11 million more to finish behind the Sox. The Expos spent $20 million less than the Red Sox; the Brewers and Pirates, about half as much.

Non-player expenses. Although every team needs the same basic front-office staff, some spend twice as much as others to meet these needs. Most big-market teams (but, surprisingly, not the Yankees) spend more than $20 million/year on administrative expenses -- often in the form of salaries and bonuses paid to the owner and his relatives. The small-market Twins, Padres, Pirates and Expos operate on $10 million or less.

The bottom line: Last year only the Yankees and Mets earned more than the AL East champion BoSox. The '96 edition may not be as successful on or off the field, but the Red Sox remain one of baseball's blue-chip investments.

Most and Least Profitable Teams in 1995


Yankees ($24.0 million): Huge cable deal covers a lot of high-priced flops

Mets ($20.8 million): Would have earned $6 million if they'd charged no admission

Red Sox ($15.4 million): Popular team, big market, moderate payroll = big bucks

Dodgers ($12.8 million): Still baseball's model franchise

Rockies ($11.5 million): New stadium and huge fan base

Rangers ($7.6 million): High overhead covered by millions from luxury boxes

Expos ($7.1 million): Not a misprint -- exceptionally well managed franchise built around good, cheap young talent


Reds ($11.8 million loss): Marge manages as well as she understands German history

Mariners ($9.8 million loss): Gambled on high-priced players and won a new stadium from Washington taxpayers

White Sox ($8.0 million loss): Owner Reinsdorf provoked the strike -- couldn't happen to a nicer guy

Royals ($6.4 million loss): Ewing Kaufman subsidized the team for years; his estate won't

Tigers ($5.3 million loss): A team which pays Cecil Fielder over $9 million/year deserves to lose a fortune

Padres ($5.1 million loss): Fans still angry at former management's dumping of stars

Athletics ($4.9 million loss): Still unclear whether Bay Area can support two teams.

Copyright © 1996 Doug Pappas. All rights reserved.
Originally published in the July 1996 issue of Boston Baseball.

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